What Are Current Car Loan Interest Rates?

What Are Current Car Loan Interest Rates?


13 Min Read

If you’re in the market for a new car but don’t have enough money, one of the first things you’re probably wondering is: what are current car loan interest charges?

That’s the right question. After all, the total interest rate on your loan can significantly impact your monthly payments—and even more importantly, it can affect how much money you end up paying in total for new or used cars. So knowing how much car loan interest rates are can help guide your decision about which financing option is best for you.

But how do you find out what current auto loan interest rates are? And how do they compare to other types of financing? We’ll answer those questions below, but first, let’s find the context.

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High Car Loan Payments are Affecting All Car-Buying Segments

It’s no secret that the average American household is in debt up to their eyeballs—and their cars are a big part of that burden. According to Michelle W. Bowman at the Federal Reserve, 71% of Americans have outstanding credit card debt. Of those people, 43% pay less than $600 per month on their credit cards, and another 35% pay between $600 and $1,000. But another group of consumers is struggling to make ends meet: those who buy new cars.

Why? Because unlike other forms of secured debt, car loans allow you to borrow money within one business day and are often financed for over five or six years—and sometimes longer if loan details allow this practice. And when auto loan interest rates go up as they have recently (from 3%-4% to 4%-5%), this can significantly impact your monthly payment amount.

Drivers Are Being Met with Faster than Usual Vehicle Depreciation

We know that the last thing you want to hear about is your car depreciating, but it’s a reality of 2023. Depreciation is when a vehicle loses value over time. It happens because the car becomes less desirable as newer models come out and more people buy them. The older model becomes less popular and therefore is worth less money.

The average automobile depreciates by about 9% per year, but in 2023, drivers are being met with faster-than-usual vehicle depreciation.

The average car loses about 9% of its value every year. But what does that mean? It means that if you bought a car for $20,000 and drove it for five years, then sold it at the end of those five years, it would only be worth about $11,000—a difference of about $9,000.

Are You Waiting to Buy a Car?

We recommend getting a loan to make the purchase right now. Here’s why:

  • The market is down. It means that if you wait, you could pay more for your car than if you got it now.
  • There are great incentives for new cars right now. You can get a great deal on your vehicle if you get a loan.
  • Once interest rates go up, you’ll have to pay more on interest. So if you’re thinking about waiting until auto loan interest rates go up to buy a car, think again—you’ll pay more for your loan than you will now.

What are Car Loans, and How Do They Work?

Car loans are secured loans that you can use in the car-buying process. Auto loans work straightforwardly and are usually structured, so you pay back your lender (the bank, local credit union, dealership, or another car buying service) over time in the regular monthly payment.

When you apply for an auto loan, you’ll need to provide information about yourself and your income, such as:

  • Your income and employment status (this will help determine if you qualify for the loan);
  • Your credit history (this will help determine if the lender will approve your application);
  • The amount of money that you want to borrow from the lender;
  • Your Social Security Number;
  • Your bank account, phone number, and email address.
current car loan interest rates

Types of Auto Loans

It can be overwhelming when you’re ready to buy a new car and want to get competitive rates. There are so many auto loan options, and every dealership, bank, or car-buying service seems to have its way of doing things. But we’re here to help!

We’ve put together a list of the different types of auto loans so that you can better understand which one is right for you.

New Car Loan

A new auto loan is a financing option that allows you to buy a new vehicle with the help of a bank or credit union. You’ll pay back new car loans with monthly payments plus auto loan rates on the determined loan term.

With this financing option, you can drive around town in a brand-new set of wheels without having to worry about paying for them immediately. You can make monthly payments instead of paying off the entire amount all at once. When you do so, you also get access to low-interest rates and flexible terms so that you can afford what might otherwise be an unaffordable purchase. But don’t forget, new car loan interest rates may vary by lender and state.

Used Car Loan

A used auto loan is a type of financing you can use to buy a used car. The loan will be paid back over time, typically with monthly payments. When you get a used car loan, the money you borrow goes towards paying for the purchase of used cars. You can also use it to pay off any other debt on your credit card and other bills that may be due soon after getting this loan for used cars. Usually, a used car loan interest rate doesn’t differ from other types of car loans.

Auto Refinance

Auto refinances for your vehicle are a way to make sure you’re getting the best possible deal to refinance a loan. Many people need to realize that their vehicle loan has an average interest rate, like a mortgage or a student loan. If you’ve had your vehicle for more than a year, it’s time to check in with your lender and see if they can offer you a better deal.

What’s fantastic about auto refinance is that it doesn’t require any money out of pocket—the bank pays off your old loan and gives you a new one with a lower interest rate. It means you’ll pay less interest over time, which can add to significant savings.

Cash-out Auto Refinance

Cash-out auto refinance is a way to get cash out of your car. You can use the money for anything you want—like paying off other debts, buying something else, or just having some extra cash.

There are a couple of different ways to do it, but generally speaking, you’ll take out a loan against your vehicle’s value and then use that money as equity in the loan.

Private Party Car Loan

A private party car loan is a loan you can get for purchasing a vehicle from a private seller. It means that the seller is not a dealership or car lot. You can get a private party auto loan from any individual, and it’s usually easier to qualify than at a dealership.

Lease Buyout

If you own a car, there’s a good chance that you’ve been thinking about buying it out of your lease. There are a few different ways to do this, but the main one is a lease buyout.

A lease buyout means you pay off the rest of your lease early and then get to keep the car. It can be a great way to save money on payments and get more use out of the vehicle.

What to Know Before Applying for an Auto Loan?

Auto loans are a great way to get the car of your dreams, but before applying for one, you should know a few things.

How much can I afford?

The first step in getting the best auto loan is determining how much money you can realistically afford to spend on a car. It will help ensure that you will only take out a too-large loan and spend what is necessary. If you don’t want to calculate this, you can use an online auto loan calculator like DinkyTown – Car Loan Calculator.

What kind of vehicle do I need?

If you already know what type of vehicle you want, it will be much easier for the lender to help you find a loan that meets your needs. If not, consider what car suits your lifestyle and budget before applying for an auto loan.

What kind of credit score do I have?

Your credit score is essential in determining whether or not your application will be approved and at what average auto loan rate with a down payment (if needed). Before applying for an auto loan, check your credit score so there are no surprises down the road.

what are current car loan interest rates

What are Car Loan Interest Rates Right Now by Credit Score?

Auto loan interest rates are based on your credit score, but what is your score, and what does the credit score mean for your car payment?

If you have a higher credit score, you’ll get a low-interest rate. If you have a bad credit score, you’ll pay more interest. Here are the current rates at which the best auto loan providers are lending to customers with different credit scores:

  • Excellent Credit Score: 3.99% – 5.99%
  • Good Credit Score: 4.99% – 7.49%
  • Fair Credit Score: 6.49% – 8.49%
  • Poor Credit Score: 8.49% – 10.49%
  • Bad Credit Score: 10.49% – 12.49%

How to Choose the Best Auto Loan Lender?

Many factors go into choosing the best lender for your needs. Here are some things to consider when selecting an auto lender.

Interest Rates

The best auto loan rates will vary depending on your credit score and the auto loan type you’re receiving. You must shop around so that you can find a low car loan rate or a suitable annual percentage rate, at least.


Most banks and credit unions charge fees for processing paperwork and other administrative costs associated with loans. So it’s essential to consider these when determining which lender best suits your needs.

Customer Service

When choosing a lender, ensure they have excellent customer service so that if anything goes wrong with your loan, there will be someone available to help resolve issues quickly and efficiently.

How to Get an Auto Loan?

You can find auto loans easily and buy a new car or pay off an old one. Here’s how to get one.

Shop around

Before you go car shopping, search for multiple lenders (banks, credit unions or private lenders) that can provide affordable auto loan offers that will fit your needs.


Getting pre-qualified is a quick process that involves answering questions about your income and credit history. Once you’re prequalified, you’ll know how much you can expect to spend each month on your new vehicle.

Fill out the loan application form

Your lender will ask for some basic information about yourself and your vehicle purchase when they send over an application form for you to fill out. You can expect this form to include your name and contact information (phone numbers, email address), model of car(s) you want (the more specific, the better), amount of down payment required (if any, depending on your credit report and debt-to-income ratio), monthly income statements showing how much money comes into your household each month.

Make monthly payments

When you get credit approval, start making your monthly car payments according to the set loan term. You can pay them offline or in a loan office or set up automatic payments via your bank account to avoid forgetting the repayment dates.

How the 2023 Fed Hikes Impact the Cost to Finance a Car

The Federal Reserve has announced that it plans to raise car loan rates in 2023, which is not so great for those looking to buy cars.

The Fed’s decision to raise interest rates means consumers will pay more money on their car loans. When auto loan rates rise, auto lenders can charge higher fees for their services. The cost of borrowing money increases because banks and credit unions can charge more in exchange for the risk they take by lending.

To understand how the 2023 Fed hikes might impact your ability to finance a car, you need to know how much you have available in savings and how much debt you already have. If your goal is to pay off your loan in full within a few years of taking it out, then this change should not affect your ability to do so. However, if you plan on keeping your loan for more than five years and having multiple payments throughout that time frame (such as with an auto lease), these increases could make it difficult for you to achieve this goal by 2023.

Frequently Asked Questions

What are good auto loan interest rates right now?

A good interest rate on auto loan funding right now is around 4%. Still, we recommend shopping around and comparing rates from multiple lenders to get the best deal possible before committing to one particular lender or loan type.

Is a 3.5% or 5% interest rate good for a car?

A 3.5% auto loan interest rate on your car is pretty standard—it’s what most auto loan lenders offer as their average interest rate. However, you can often get better rates if you shop around and look for a lender who will give you the best auto loan rates.

Who has the best rates for car loans?

There are best auto loan lenders out there who provide reasonable auto loan rates regardless of borrowers’ credit scores. So how do you know which one will be right for you? The answer is in the loan details; always compare average auto loan rates.

What credit score do you need to get 0% auto financing?

The answer is that it depends on the lender and what kind of car you want (new or used car). For example, some lenders will offer 0% financing if your credit score is in the high 600s, while others will require credit scores of 700 or higher.

Can I sell my car with a loan?

The short answer is yes, and it’s a great idea! If you have a loan on your car, you can sell it and walk away with cash in hand. To do this, you’ll need to determine if there’s enough equity in your vehicle to cover the auto loan rates and any fees associated with selling it.

Can I get an auto loan with a bad credit score?

Yes! You can get a loan with a poor credit score from most lenders that don’t have a minimum credit score requirement. But you’ll want to ensure you have a reliable source of income to get the best new or used car loan interest rates. If you don’t have a job, a good or fair credit score or your income is unreliable, it will be tough for you to get an auto loan, but not impossible.

Get the best loan options to buy a car of your dreams!Apply


Dinky Town – Car Loan Calculator – https://www.dinkytown.net/java/car-loan-calculator.html

Federal Reserve – https://www.federalreserve.gov/newsevents/speech/bowman20221117a.htm

Ramsey – Car Loan Calculator – https://www.ramseysolutions.com/saving/car-depreciation

Edward Evans

Written by Edward Evans

Written by Edward Evans

Edward Evans is a money management expert and a freelance author of personal finance columns. He aims to provide accessible financial advice to improve financial literacy for average Americans and inspire them to take control of their personal finances and build wealth.